Independent oil explorer Anadarko Corp. (NYSE:APC) is reportedly in talks with Norwegian national oil company Statoil to sell some of its assets in Brazil.  Anadarko, which got into a $4 billion settlement with BP over the Gulf of Mexico spill in 2011, was expected to sell some of its assets to cover the costs. According to FT, Statoil is expected to bid $3 billion for some of Anadarko’s offshore assets in the South American nation. Anadarko has licenses to explore around 1 million acres in offshore Brazil as well as a 300 million barrel find in the Campos Basin. Energy majors like Chevron (NYSE:CVX) also have significant interests in offshore Brazil. We have a $90.30 price estimate for Anadarko, which is at a 10% premium to its current stock price.
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Anadarko has made four finds in offshore Brazil to date.  The company has been active in deepwater prospects across the globe and made a major offshore gas discovery in Mozambique in the recent past. Anadarko is looking to develop a LNG facility at its Mozambique find. Since LNG production is a capital intensive activity, the company has been looking at ways to generate the resources to go ahead with its plans. The sale of its assets in Brazil could help the company pursue its plans in Africa while also helping it to meet the expenses related to its $4 billion settlement with BP over the Gulf of Mexico spill. The company may also have to face addition civil penalties imposed by authorities because of its role in the incident.
Anadarko’s liquids output has been rising over the last couple of years, and we expect the growth to continue over the next few years. The company is pushing ahead with its plans to begin oil production in its projects in Algeria and the Gulf of Mexico. The company’s crude oil and condensate business contributes to approximately 63% of our price estimate for its stock.Notes: